Indonesia Fiscal Reform DPL

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The development objectives of First Phase of Fiscal Reform Development Policy Loan (DPL) Project in Indonesia were as follows: 1) improving composition of spending, budget execution and efficiency of spending; 2) increasing tax administration efficiency, compliance management and audit capability, and reducing the cost of paying taxes; and 3) increasing revenue potential and economic efficiency of tax policy. This Fiscal Reform DPL series is structured around the following three pillars, set of objectives and government program reform areas: 1) The first pillar, Improving Quality of Spending, will improve composition of spending, budget execution rates and efficiency of spending by (i) improving central government budget allocation; (ii) strengthening budget monitoring and management through Financial Management Information System (FMIS), Sistem Perbendaharaan dan Anggaran Negara, State budget and treasury system (SPAN); (iii) facilitating investment by private sector in essential infrastructure; (iv) removing barriers to multi-year contracts for government procurement; and (v) conducting early procurement. 2) The second pillar, Strengthening Revenue Administration, will increase tax administration efficiency, compliance management and audit capability, and reduce the cost of paying taxes by (i) strengthening Value Added Tax (VAT) administration; (ii) increasing electronic tax filing; (iii) establishing a unique and permanent taxpayer Identification (ID) system; and (iv) improving Directorate General (DG) Taxes access to taxpayer asset and financial data for audits. 3) The third pillar, Enhancing Tax Policy, will Increase revenue potential and economic efficiency of tax policy by (i) improving VAT, Luxury Goods Sales Tax (LGST) and Excise tax regimes; and (ii) improving Income Tax regimes.